Working: Ignore that handbook at your own peril

WORKINGEmployee handbook: Ignore it at your peril

By L.M. Sixel |
October 14, 2010

You studied all your mortgage documents carefully before you committed yourself to a long-term loan. Ditto with all the fine print associated with your credit cards. So why aren't you doing the same thing at work?

Companies issue employee handbooks, health insurance plan binders and descriptions of retirement programs. They're long, boring documents, and the print is typically small, but it's important to study them carefully. Then read them again before you change jobs, have a baby or set a retirement date.

Knowing the rules can avoid lots of heartache later. It can mean a whole lot more money in your pocket. Or not, as some unfortunate folks have discovered.

One common mistake is not reading a job offer letter closely enough, said Martin Shellist, who mostly represents individual workers as an employment lawyer with Shellist Lazarz Slobin in Houston.

The letter may say the job will last for two years, but in some remote subsection there is likely a clause that says the company has a right to terminate the worker with or without cause with, say, a 30-day notice, Shellist said.

Answers on vesting

Another key detail that workers often miss to their later dismay is the terms of vesting.

Vesting refers to the time you must spend on the job before you receive all of your accrued benefits. So if the vesting period for stock options is five years — the length of time you must work before receiving the full value - you'd want to know that before thinking about changing jobs, he said. Especially if you're close to the five-year mark.

Sometimes Shellist has to break the bad news when clients come into his office.

They say: "Gosh, I wish I would have read the fine print."

Another often-overlooked phrase is buried in the summary descriptions of benefit plans and says the company "reserves the right to amend, terminate and modify" its programs, said Kerry Notestine, an employment lawyer at Littler Mendelson in Houston who represents management.

In the case of retiree medical benefits, that little phrase can pack a punch - especially if you're counting on heavily subsidized medical care upon retirement.

"People get the documents but then they don't read them," Notestine said. If they did, they would make backup plans in case the insurance is canceled.

Some companies have a rule that if you're insured the first day of the month you're insured the entire month. If you're planning to change jobs, time your last day so you can get insurance for an entire month.

Similarly, if the new job doesn't provide health insurance immediately, review the benefits packet before you accept the job offer so you can ask your new employer to cover the cost of continuing your former policy.

Mistakes by executives

It's not just the rank and file who don't pay attention. Ignoring the nitty-gritty also snags big-time executives .

Some companies provide long-term compensation plans for their senior level executives and base the payout on the company's earnings over the previous three years, said John Zavitsanos of Ahmad, Zavitsanos & Anaipakos in Houston, a commercial litigator who represents executives in employment cases.

When the economy is bad, as it is now, an executive who skipped the fine print might discover it would have been better to have retired earlier to get long-term payout based on more profitable years.

"It's very bizarre, but I've seen it a number of times," Zavitsanos said.

Even though millions of dollars are involved, Zavitsanos said, some executives don't take the time and effort to understand the complicated plans that are often written in legalese rather than language most people can understand.

"It cost one guy $3 million," said Zavitsanos, who said his client found out too late that he would have been better off financially if he had retired just a year or two earlier.

So why aren't folks more careful?

"When people are starting a new venture, a new job or new relationship, they're filled with hope, trust and good faith," Shellist said. "And they don't end up paying attention to the deals as they should."

Half of marriages end up badly, he added. Plenty of jobs don't turn out as expected, either.